Scenario 1: Creditor proposal
Client snapshot
Husband and wife with two children in university
Homeowners
One family car
Household income: $85,000
The situation
This hardworking family had $700 per month left over after living expenses to pay off their debts. They came to Perrault and Associates because a credit card company had sent their account into collection and the collection agency was threatening to garnishee their wages (remove a certain amount from every paycheque toward paying the debt). This family had other credit cards to pay off plus a student loan.
The solution
Our professionals met with the family, made a list of their assets and their liabilities and set up a monthly budget that was reasonable and balanced. Working closely with the family to ensure they could make ends meet, we made an offer to creditors that the family would eliminate their debt by paying $500 a month for 36 months. The creditors accepted.
The benefit
The offer amounted to just 50% of what the family owed creditors. Interest stopped accumulating and no extra fees of charges applied to their situation.
Scenario 2: Bankruptcy
Client snapshot
Self-employed carpenter supporting three children and a spouse
Debt on line of credit: $25,000
Credit card debt: $35,000
Income taxes owed: $90,000
The situation
This client had no assets except for the tools of his carpentry trade. He was renting his home and his truck was financed at 110% of its value. When Perrault and Associates made a budget for him we found that he was earning just enough money to pay for his family’s living expenses and house rental. There was no money available to make an offer to his creditors.
The solution
Since a proposal to his creditors was out of the question, the client opted to declare bankruptcy so that he would be discharged from his debts.
The benefit
In a bankruptcy, the client’s assets are typically given to the trustee to be liquidated and then are distributed to the client’s creditors. However, in this scenario, the client was allowed to keep his truck by continuing to honour the contract agreement with the dealer. Importantly, he was also allowed to keep his tools of trade as they are exempt from seizure in Ontario.
Scenario 3: Budget and money management
Client snapshot
Single woman earning a comfortable income
Owns a home mortgaged at 95% of its value
Debt on line of credit: $20,000
Credit card debt: $5,000
Overdraft increasing every month
The situation
This client overspent her income every month. She consulted Perrault and Associates to see if she should declare bankruptcy or offer a proposal to her creditors.
The solution
Perrault and Associates sat down with this client to establish a monthly budget for the next year. We also analyzed the client’s spending habits over the previous six months and found that she was not timing her paycheques and her monthly payments optimally. The result was that she paid nearly $500 more every month than she should in bank charges, credit card fees and interest. We advised that she alter her payment schedule, which eliminated a substantial part of her problem.
The benefit
We worked with the client over a few more appointments until she felt confident enough to control her finances. Through the process, she simultaneously gained self-esteem and financial freedom.